the power of stockholders to combine for the purpose of maintaining a management in control, and if done in good faith there is no legal objection to it. The mere fact that one of the results of the plan may be to perpetuate the control in the hands of its pres this new stock is common. I do not agree necessary to cite holding that it is within with Mr. Hardin that the effect of this plan is to make the present common a class of preferred stock. I think that it is one of the subdivisions of the common. The essential elements of common stock are that the holders have an opportunity to make profit if there is any and participate in the assets aft-ent stockholders does not vitiate the plan. er all other claims are paid, and bear the loss if there be such. I think he refers to material advantages, priorities, and preferences, and not to such privilege as the right to vote. See, also, Elkins v. Camden Atl. R. Co., 36 N. J. Eq. 233, at page 237. The stockholders were entitled to vote as their selfish interests dictated. "By common stock is meant that stock which [6] B. Some of the directors who voted for entitled the owners of it to an equal pro rata the plan to amend the certificate of incorpodivision of profits, if any, there be; one stock-ration became syndicate subscribers. There holder or class of stockholders having no advantage, priority, or preference over any other is no evidence that they were subscribers beshareholder or class of stockholders in the divi- fore they voted. It is insisted by reason of sion." Cook, § 12, p. 62. their participation the entire transaction is void. I have found that there was no fraud (none is charged), and that the directors were in no wise (and could not have been) influenced by the fact that they were going to participate in this underwriting agreement. When they became subscribers, they did so for the benefit of the company. But four out of the eleven directors became parties. It is said, however, that the court must find under the rule enunciated by the Court of Appeals in Steel Corporation v. Hodge, 64 N. J. Eq. 807, 54 Atl. 1, 60 L. R. A. 742, not only that the syndicate contract When there is found stock which answers so far as material interest in the property is concerned these conditions, this is the common stock. The Legislature has provided that this common stock may be divided into any number of classes. The only distinction which I can think of must be in relation to voting rights. There may be class A voting stock with full voting power, class B, allow-falls, but that the entire transaction is abing each share one-half a vote, and so on. The bar generally, I think, has put the construction that I have put on this section. There were introduced in evidence some 15 or more charters, some of very large corporations, providing for classes of common stock with and without voting power and one or more with the preferred stock having the exclusive voting power. The conclusion I have reached is that the corporation may issue this peculiar class of stock. [5] 2. A. That the purpose of the plan is to retain control in the present stockholders does not vitiate it. The question is one of good faith. There is no charge of bad faith in the present case. In Warren v. Pim, 66 N. J. Eq. 353, page 408, 59 Atl. 773, 794, Mr. Justice Swayze, dissenting, said (referring to the voting trust): "If the only object of the voting trust is to secure permanency of management, with a view to what the stockholder honestly considers to be the best interest of the corporation, I see no objection to the adoption of any necessary means authorized by the statute to secure that end. But can it be contended that, if a corporation finds it necessary to borrow money upon bonds issued for a long term of years, the stockholders cannot, consistently with public policy, in order to secure the loan, vest the management of the corporation in hands satisfactory to the lenders and for a term commensurate with the loan?" solutely vitiated. I am not going to at this time pass upon whether or not this contract can be set aside in the present proceeding, or whether the corporation can be restrained from paying out moneys under it, or whether the syndicate subscribers may be compelled to return to the corporation the moneys they may receive by virtue of it. No application for such relief is made. Complete justice may be done, so far as this branch of the case is concerned without preventing the consummation of this plan. The contract is not void, but voidable, and may be ratified by the vote of the stockholders, and there is no evidence before me that full disclosure was not made at the meeting of February 14th, at which time the stockholders approved the plan. I do not think that the complainant under the circumstances may now insist that this entire transaction should be set aside, because of the rule of law which he invokes, at least upon this preliminary application. 3. The stock was purchased by the complainant upon the 31st of January. The bill was not filed until the 8th of February. The complainant knew that the meeting was to be held on the 14th, and he also knew that the effect of bringing this suit on the eve of the meeting would be to create great disThe opinion, though a dissenting one, se- turbance in the company's affairs. It has cured the vote of five other judges. The been held, and I think ought to be the rule, case was decided by a vote of seven to six that although the right of a complainant to upon another point. Only two judges took bring a suit such as this cannot be affected a diametrically opposite view. The opinion, by the fact that he bought in after the plan therefore, is entitled to great weight. was promulgated, and for the purpose of liminary application he must move with the utmost speed. The length of time which will constitute such laches as to prevent preliminary relief depends upon each particular case. No excuse is given for the delay of nine days. Quære: Whether there was not such delay here as to warrant the court in denying temporary relief. this stage of the proceedings, and that upon the ground referred to in the above-cited case. The order to show cause will be discharged, and the restraint vacated. (87 N. J. Eq. 167) MARYLAND CASUALTY CO. v. HANLON. (No. 40/526.) 1917.) 1. INSURANCE 146(1)—INDEMNITY INSURANCE-CONSTRUCTION OF CONTRACT. In construing a contract of indemnity insurance, where no extrinsic evidence is offered, the situation of the parties, the purpose to be accomplished, and when, are to be considered. [Ed. Note.-For other cases, see Insurance, Cent. Dig. §§ 292, 296, 297.] 4. Under the opinion of the Delaware court (State v. Brooks, 74 Atl. 37; Id., 3 Boyce [26 Del.] 1, 79 Atl. 790, 51 L. R. A. (Court of Chancery of New Jersey. Feb. 19, [N. S.] 1126, Ann. Cas. 1915A, 1133), it would seem to follow that if this stock is issued, and I am wrong in my conclusion that it may be issued without voting power, the only effect will be that the contract which is expressed by the certificate of amendment is void, and the stock will, in fact, have the voting power. There is no question raised but that the corporation may properly increase its capital stock to the extent of $45,000,000, so that if the only effect is that the stock will in fact have the voting power when everybody thinks now it has not, is any harm done? Is there any irreparable injury which will warrant the award of temporary restraint? The right of the holder of these 100 shares to his dividend cannot be affected by these proceedings. It may be that stockholders cannot be forced to take this stock in lieu of dividends, but that is not a matter for present consideration. 2. INSURANCE 146(2)-INDEMNITY INSUR- - Where a subcontractor, as collateral to issuance of an indemnity bond, agreed to assign real estate to surety company "in event of claim under bond, and only for an amount equal to legal liability," the word "claim" meant one reduced to certainty by judgment, and not the mere assertion of a claim. [Ed. Note. For other cases, see Insurance, Cent. Dig. § 294. For other definitions, see Words and Phrases, First and Second Series, Claim.] 3. INSURANCE 146(3)-INDEMNITY INSUBANCE-GENERAL RULE OF CONSTRUCTION. Where contracts of a surety company for indemnity are ambiguous, they should be construed more favorably to the other party, since they are carefully prepared by the company's counsel for insurer's protection. [Ed. Note. For other cases, see Insurance, Cent. Dig. § 295.] Bill by Maryland Casualty Company, a corporation, against John Hanlon. Bill dismissed. Arthur T. Dear, of Jersey City, for complainant. Benny & Cruden, of Bayonne, for defendant. 5. In Fielden v. Manchester & Yorkshire Railway, D. G. Sm. 535, 64 English Reprint, p. 237, a case somewhat similar to this was brought to the attention of Vice Chancellor Sir Knight Bruce. It appeared that the corporation was about to issue something over £1,000,000 of preferred stock, and the act was alleged to be ultra vires;. the bill was filed by a holder of something like 54 shares out of a total of 1,000 to enjoin the issuance of the stock. None of the stock had been issued at the time of filing of the bill, but £770,000 had been subscribed for and a payment of some 10 per cent. made on account. GRIFFIN, V. C. The complainant by its In the present case the stock has been sub- bill seeks to compel the defendant to convey scribed for by the syndicate. There has been certain lands to it under a supplemental inno payment made on account. The report demnity agreement. The defendant, while states that the court was of opinion that admitting the agreement, says the contingenmuch more mischief was likely to be done cy has not arisen which gives the complainby "interfering now in a manner from which ant this right. The case discloses that Linthe court might afterwards see reason to de- coln-Steel-Fleming Company and Joseph A. part, than by declining to interfere upon the Morrison, Associated (hereinafter called the present occasion, although it might ultimate-contractors), had a contract for the construcly appear that the plaintiff was entitled to tion of certain sewers in district No. 9, town the interposition of the court." The court of Greenwich, Conn. The contractors, on was therefore of opinion it ought not to July 8, 1915, entered into a subcontract with grant the injunction; but it desired that it Gibbons & Hanlon (hereinafter referred to as be understood as giving no opinion on the the subcontractors) for the rock excavation. question of right. To indemnify the contractors, said subcontractors and the complainant gave a bond, dated July 8, 1915, in the sum of $10,000, to the contractors. On July 7, 1915, the subcontractors signed the usual printed application for the bond. On July 8, 1915, John I should therefore be inclined in this case, under the circumstances, even though it appeared to me that there might be some doubt as to whether this company had the power to issue this stock, to decline to interfere at "I herewith agree, in consideration of the Maryland Casualty Company issuing bond on behalf of Gibbons & Hanlon, to give as further indemnity an assignment of all my right, title and interest in real estate situate 80 and 90 and 124 West Fifteenth St., Bayonne, and 124 West Fourteenth St., Bayonne, N. J., valued at $20,000, with mortgage of $6,000 thereon. "Such assignment to be executed in event of claim under bond, and only for an amount equal to legal liability under the bond. Hanlon, the defendant, one of the subcontrac- | against losses incurred and to be incurred tors, signed a memorandum addressed to the under the bond; (2) that the defendant might complainant, as follows: be decreed to execute to complainant an assignment or other suitable evidence of the transfer of his title as security to the complainant against losses incurred and to be incurred; (3) that the further indemnity agreement be decreed to create and to have. created, and be established as creating and having created from its date, a lien on the premises mentioned in the indemnity agreement, as collateral against the losses sustained, and to be sustained, by the complainant under the bond. It may be said, in passing, that there is no proof of actual loss having been sustained by the complainant. After the filing of the bill, and on January 5, 1916, the contractor began suit in the Supreme Court in Putnam county, N. Y., against the complainant and the sub-contractors on their bond, which suit is held in suspense pending the completion of the work and the ascertainment of the amount of the claim against the subcontractors. "No prior assignment of above has been or will be made." The question whether the complainant is entitled to enforce the indemnity agreement at this time depends on the construction of the clause thereof, which reads as follows: "Such assignment to be executed only in event of claim under bond and for an amount equal to legal liability under the bond." 21 N. J. Law, 73. It sheds little light on the been offered, the contract must be construed, subject; and, as no extrinsic evidence has considering: first, the situation of the parties; and, second, the purpose to be accom The subcontractors proceeded with the work until about September 20, 1915, upon which date the contractors gave to the subcontractors notice, under article 3 of the contract, that if they did not "proceed to supply sufficiency of properly skilled workmen and materials and plant of the proper quality, and prosecute the work with promptness and diligence, and also settle up the debts already incurred by them" within three days after the receipt of said notice, it would take such action as might be necessary to protect their interests in the matter. This notice was served on the subcontractors, and a copy sent to the complainant. On September 29, 1915, the contractors sent a long letter to the complainant, charging nonperformance by the [1] In seeking to interpret the language subcontractors, and asking complainant "to live up to the conditions of your obligation quoted resort has been had to the bond and and to at once proceed to carry out the terms application. This application is very lengthy, and conditions of the contract, the perform-containing 13 long, intricate covenants printance of which you have guaranteed." On ed in small type, and was evidently drafted October 2, 1915, the contractor wrote the sub- by the complainant to overcome the effect of decisions of the type of Jeffers v. Johnson, contractors, terminating the employment of the subcontractors, stating that they would hold them and the bonding company liable for their loss and damage. A copy of this letter was also sent to complainant on the same day, which again called on complainant "to at once proceed to carry out the terms and conditions of the contract." While the contractors allege nonperformance of the contract, justifying the service of the notice, the subcontractors aver that while they were doing the work in accordance with the terms of the contract they were wrongfully prevented by the contractors from proceeding further. In this situation the complainant, declining to carry out the contract on the subcontractors' account, it was undertaken by the contractors who, on March 17, 1916, rendered a bill to the complainant for $12,320.59. This sum is made up substantially of the difference between the alleged cost to the contractor of excavating the rock-about $6.90 a cubic yard-and the contract price, $2.75. On October 15, 1915, shortly after the contractor had determined that the subcontractors had abandoned their work, and before the claim of March 17, 1916, had been served upon it, complainant filed its bill of complaint, praying: (1) That complainant might have a lien upon the premises referred to in the supplemental agreement to secure it plished, and when. The complainant is a surety company engaged in business for profit; the defendant is a contractor whose firm required a bond to obtain a contract. The complainant desired indemnity; the defendant was willing to give it, not on the signing of the bond, but on the occurrence of some future condition. The indemnity agreement covers substantially all of the property of the defendant. [2] What did the parties intend when they used the language, "Such assignment is to be executed only in event of claim under bond, and only for an amount equal to legal liability under the bond"? The bond, which is on the printed blank prepared by the complainant, in the first condition, which deals with default on the part of the subcontractors and the liability of the surety company in case the contractor should complete or relet the contract, provides that: "All reserves, deferred payments and all other moneys provided in said contract which would have been paid to the principal had he completed the contract in accordance with its terms, shall be credited upon any claim the said obligee may make upon said surety." The bill, having been prematurely filed, should be dismissed. (91 Conn. 532) WARNER v. CORBIN, Tax Com'r. (Supreme Court of Errors of Connecticut. March 14, 1917.) TAXATION 895(1)—INHERITANCE TAX-VAL UATION OF PROPERTY. [3] The second condition provides "that no came bound to assign practically all his claim, suit or action by reason of any de- property to the complainant as collateral to fault shall be brought against the principal indemnify it against a loss it might never or surety after the 8th day of January, 1916," sustain, to ascertain which fact might take and also "that no judgment shall be rendered several years, and which would virtually take against the surety [the complainant] in ex- from the defendant the use and disposal of cess of the penalty of this instrument," the his property for business purposes, or otherpenalty being $10,000. The language "to be wise, and might work an irreparable injury to executed only in event of claim under bond,” | him, requires that, considering the personaliconsidered alone, is somewhat ambiguous. ty of the parties and the respective businesses It might mean either when the claim is as- in which they are engaged, the agreement serted, or when established by judgment. should plainly express the intent now assertTaken in the sense used in the first and sec-ed by the complainant before it is entitled to ond conditions of the bond, it may be con- relief. strued to mean the actual money demand presented by the contractor to the complainant, because the first section provides that certain reserves, etc., should be credited upon any claim the said obligee might make upon the surety. This language imports the idea that the contractor should present his bill for damages and credit on account the reserves and deferred payments, leaving a balance for which it makes its claim upon the complainant. The claim so presented may be disputed, and may not ultimately be sustained for the amount claimed, and yet, in strictness, it may be treated as "a claim under the bond." But such interpretation does not aid the complainant, because no such claim was presented before the filing of the bill. But any ambiguity seems to be dispelled by the subsequent language, which deals with the amount for which the assignment should be given, viz. "only for an amount Commissioner, for a reappraisement of the equal to legal liability under the bond." Clearly, the parties did not intend, on the mere assertion of a claim, before the amount was ascertained, that this assignment should be made, or they would have stated the amount with definiteness, e. g., as the penal- | court. ty of the bond. It must therefore be quite court sustaining a demurrer to the reasons apparent that the parties intended that "claim" in the agreement meant one reduced to certainty in amount, which being ascertained, the right of the complainant to the assignment would automatically vest. If the contract is ambiguous, it should be construed more favorably to the defendant. The complainant is a surety company engaged in business for profit in which the risks are carefully calculated, and the premium fixed at a figure to make the business commercially profitable; the bonds, applications, and other instruments are carefully prepared by their counsel for their protection, for which reasons it has been held that if the instruments are susceptible of different meanings, that one should be adopted which is favorable to the other party. American Surety Co. v. Pauly, 170 U. S. 133, 18 Sup. Ct. 552, 42 L. Ed. 977; Tebbets v. Mercantile Credit Co., 19 C. C. A. 281, 73 Fed. 95; Brandt on Suretyship & Guaranty (3d Ed.) § 15. To hold that on the mere assertion of a claim, however ill founded, the defendant be By the direct provisions of Pub. Acts 1915, c. 332, § 2, for the purpose of computing the succession tax to be paid on a decedent's estate the property must be inventoried at its "actual value," and not the assessed value fixed by local officers. Cent. Dig. 88 1714, 1716.] Appeal from Superior Court, Hartford Application by William H. Corbin, Tax estate of Elizabeth G. Warner, deceased. From a decree of the probate court ordering the estate to be reappraised, George H. Warner individually as devisee and as executor of the estate appealed to the superior From a judgment of the superior for appeal and affirming the decree of the probate court, Warner appeals. Affirmed. The defendant tax commissioner, acting under the authority of section 2, c. 332, of the Public Acts of 1915, made application to the probate court for the district of Hartford for a reappraisal of the estate of Elizabeth G. Warner, who died in August, 1915, to furnish a basis for the ascertainment of the amount of succession tax to be paid to the state. Upon the hearing of that application, the commissioner complained that in the appraisal theretofore made in the regular course of the settlement of the estate and on file certain real estate in Hartford was undervalued, and presented testimony to establish that fact. The plaintiff on his own behalf as legatee and devisee and as executor objected to a reappraisal being ordered for the sole reason that the real estate in question was, in the years 1914 and 1915, assessed for the purposes of taxation at the sum appearing in the inventory and appraisal on file in the court. Notwith standing this objection, a reappraisal wased for the standard specified in the act some ordered and three persons appointed to other purely arbitrary or artificial one, to make it. From this order and decree the wit, the assessment valuations as made by plaintiff appealed to the superior court, and in that court filed reasons of appeal which, after reciting the foregoing facts, stated his grievance to be that the order and decree was passed notwithstanding that the property was already appraised at its assessed valuation. A demurrer to these reasons of appeal having been sustained and final judgment rendered affirming the action of the probate court, an appeal to this court was taken. Charles E Gross and Charles Welles Gross, both of Hartford, for appellant. George E. Hinman, Atty. Gen., and Charles W. Cramer, of Hartford, for appellee. the various assessment officers in the 168 towns of the state however unfairly or unlawfully they might have been arrived at. We find no warrant for this either in the act or in considerations of right and justice. Certainly such substitution would not make for fair treatment of the state or for uniformity of results as between different estates in the process of settlement and devolution of title through the agency of the law. The plaintiff's main reliance appears to be upon a single sentence taken from Dennis's Appeal, 72 Conn. 369, 372, 44 Atl. 545, to the effect that there is no distinction in the law between the assessed and actual value of real estate. That sentence, appropriate PRENTICE, C. J. (after stating the facts enough as used in its connection and as apas above). The appellant claims to be ag- plicable to local taxation procedure, was not grieved by the action of the probate court in used as a statement of the broad, general ordering a reappraisal and by the judgment principle applicable to all tax regulations of the superior court affirming that order. and conditions that the law recognizes no The contention upon which his alleged distinction between actual and assessed valgrievance is founded is that the state, in uations of property so that as a matter of the ascertainment of the valuation of the de-law they are one and the same thing. If it we shall have no hesitation in cedent's estate for the purpose of computing were, the succession tax to be paid thereon to it, repudiating it. It cannot be, for instance, is, in the absence of radical changes in the that the state, in tax regulations and proproperty, bound by the valuations fixed by cedure on its own behalf and in its own inlocal assessing officers in the performance of terest, is bound to accept as representing their official duty, and may not claim to actual values the figures at which property have them exceeded. This narrow proposi- is set in town assessment lists by local oftion of law furnishes the only ground of ob- ficers for local purposes, regardless of whethjection to the action of the probate and er or not they were so set in those lists superior courts. either mistakenly or in direct violation of the mandate of the law. In fact, its action is directly to the contrary. Where the payment and collection of state and county taxes is concerned, the assessment figures of the town officials are not taken as representing actual values. The law recognizes that they may not, and creates a board of equalization specially authorized to equalize and adjust the assessment list of the several towns so that they shall represent the actual cash value of the property therein contained. P. A. 1911, c. 250. Chapter 332 of the Public Acts of 1915 embodies the existing law governing the collection and payment of succession taxes, and the law applicable to the present situation. In section 2 of that act it is provided that an inventory of all property of every deceased person shall be made and sworn to by the executor or administrator and deposited in the probate court, and that the property so inventoried shall be appraised at "its actual value" by disinterested persons under oath. Provision for a reappraisal But that is not all. Those levies made by upon the application of the tax commissioner and an order therefor by the probate court the state, which we familiarly call succesfollows. These provisions make it clear that sion or inheritance taxes, have little in the appraisal upon which succession taxes common with taxes as ordinarily understood. are to be paid shall be made upon the basis In fact, they are not taxes in any true sense. of actual value. The statute expressly so They are not levied, as taxes proper are, states, and authorizes the state to take steps either upon property or against persons. to the end that such a result may be at- They differ from taxes, properly speaking, in tained. They leave no room for doubt that that they are exactions in the nature of what is aimed at is an appraisal which shall death duties "to be paid to the state upon the fairly and correctly represent the true value occasion of death and the consequent transof the property of the estate, and that the fer of ownership in the property of the deacceptance of any other standard of valua- cedent, through the intervening custody and tion, however or by whomsoever determined administration of the law, to the persons or arrived at, is forbidden. This latter designated by the law, through the statutes course. is the one which the plaintiff urges regulating wills, descents, and distributions." |